International Journal of Science and Research (IJSR)

ISSN (Online): 2319-7064

Impact Factor (2012): 3.358

Strategic Management Implementation Fred R.

David Concept at PT Indofood Sukses Makmur,
Tbk
Etty Afriani1, Fury Ratna Dewi2, Mulyati3
1, 2, 3

Indonesia University of Education

Abstract: Food and beverage industry is the most promising businesses in the Indonesian business. With the largest population in the
world and increased economic growth, making Indonesia as a potential market thus trigger the growth of new players in the competitive
landscape in the food and beverage industry. This study was conducted to examine comprehensively application of strategic
management concepts Fred R. David at PT. Indofood. By using three stages of strategic management from Fred. R David concluded
that PT. Indofood is a company companies that are well positioned to continue to grow conduct business development. The QSPM
matrix calculation results shows the 5.94 score for Horizontal Integration as the best alternative strategies that can be implemented by
PT. Indofood with expansion and diversification.
Keywords: QSPM, economic growth, strategic management

1. Introduction
Food and beverage industry is a very promising business
opportunities in the current global era. With the increase in
economic growth will ultimately improve society aggregate
consumption level, in this sector of the food and beverage
industry the most benefit. In a report published in mid-2012,
McKinsey estimates that Indonesia would become the 7th
largest economy in the world in 2030, up from his current
position at No. 16, partly driven by domestic consumption
continues to increase as rising income per capita, and rapid
urbanization.
Economic prospect in the food and beverage sector in
Indonesia is very promising for the increasing competition,
both from existing players and new players. Not only that,
increase in per capita income will increase society welfare
and changing consumption patterns and consumer spending.
Consumer will be inclined to choose a premium quality
product at an affordable price. The players in the food and
beverage industry tried to seize the opportunity by compiling
a number of strategy establish business excellence to meet
the challenges of an increasingly competitive market. No
exception to the old player as well as PT. Indofood.
PT. Indofood Sukses Makmur was established in 1968 under
the name of PT. Panganjaya Intikusuma and changed its
name to PT Indofood in 1994. In recent decades, PT.
Indofood has transformed into a Total Food Solutions
company with operations covering all stages of the food
production process, from production and processing of raw
material to the final product available in the market. The
company conducted an IPO in 1994 by issuing 763 million
shares at par value of Rp. 1000 per share. In the 25 years of
his business, many companies make acquisitions as a way to
make the company's business development as the number
one company in the food and beverage industry in Indonesia.
Now, PT. Indofood known as an established and leading
company in each business category. In carrying out its
operation, Indofood gain benefit from business model
Paper ID: 020131795

consisting of four Strategic Business Group which are

complementary, namely Consumer Branded Product (CBP),
Bogasari, Agribusiness Distribution.
As one of the largest food companies in Indonesia, Indofood
are in a good position to be able to seize the opportunities
and meet the challenges of the market. With a market
capitalization more than 50 trillion at the end of 2012 makes
the PT. Indofood Sukses Makmur the main player in the
food and beverage industry with a market share of 75%. In
accordance with company's vision "Total Food Solutions",
PT. Indofood continue to develop and implement business
strategies to be able to create long-term business success and
as an effort to develop company's competitive position amid
competition. Business strategy creation for the company
done by score mapping for internal and external factors,
score results will be mapped in a matrix that describes the
position and alternative strategies that can be implemented in
the company. Hajikani and Jafari (2013), strategy as it
relates specifically to strategic planning as a management
tool. It began by explaining the concept of strategy, and then
strategic theories were presented.
This study was conducted to examine how strategic
management implementation at PT. Indofood Sukses
Makmur, Tbk in 2012 by using framework of strategic
management analysis models Fred R. David (three stage),
how business strategies are chosen and implemented by
company in accordance based on each matrix analysis has
been done and to to determine whether business strategyy
recommended from matrix analysis result relevant to
business implementation conducted by PT. Indofood during
2012.

2. Literature
Search on Strategic Management literature suggests the
occurrence of significant changes to what considered
"strategic" in 1980s, 1990s and the first half of 2000s
decade. Strategic management is a field of science that

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International Journal of Science and Research (IJSR)

ISSN (Online): 2319-7064
Impact Factor (2012): 3.358

rapidly growing directly proportional to the ever-changing

environment. Changes to something that considered strategic
indirectly has changed strategic management essence.
Strategic can be interpreted as something which will
determine the company survival in the midst of its
environment
(Kristamuljana,
2011:70).
Strategic
management by Fred R. David (2009) is art and knowledge
in formulating, implementing and evaluating decision that
enable cross functional organization achieve its goals.
Wheelen and Hunger (2003), strategic management as a
science on a set of managerial decision and action that
determine companys performance in the long term.
Strategic management process start with internal and
external factors analyzing that affect in business company.
Company's internal environment analysis known as a
resource based approach by capabilities analyzing, namely
company ability to exploit its resources so as to know the
company strength and weakness factors. Capabilities are the
company's business functions, such as marketing capability,
operations capability, financial capability, and human
resource management capabilities. External environment
analysis by observing external condition and identify
strategic factors external companies into opportunities and
threats for the company. The external environment consists
of macro environment (Political, Economic, Social and
culture, Technology, and Natural) and microenvironment
(Customers, Competitors, Collaborators, Creditors). Abdi et
al (2013), analysis of opportunities and external threats,
primaly used to evaluate examine the opportunities and
minimize the threats and also this analysis of weak point is
important to study the inner performance of companies (such
as procedure and research and development effectiveness).
Throughout the 1980s and 1990s decade, tool and learning
phenomena emerged as the analytical framework of
management in order to maintain company viability in the
midst of environmental change. Tool and learning
phenomena as an analytical framework emerged in the midst
of awareness about external environmental factors influence
and stronger internal environment and affect company
survival. Some tool and learning strategic management
including the popular "three mainstream (three stage)
suggested by Fred R. David. Analytical framework with
strategy formulation matrices as an analytical model has
been adapted to all organization sizes and types, so it can be
used to assist management companies in identifying and
selecting strategies most appropriate and in accordance with
company condition. The three stages are:
Input Stage, conducted an analysis to company internal and
external factors. The matrix used as an analysis tool, namely:
a) Industry and Company Strategic Environmental Analysis.
Analysis using matrix EFE (External Factor Evaluation) as
a tool to audit the company's external environment
b)Company Internal Analysis. Analysis using matrix IFE
(Internal Factor Evaluation) as a tool to audit the
company's internal environment
Matching Stage, focuses on creation of alternative strategy
through internal and external factors incorporation. The
matrixes used as an analytical tool at this stage are:
Paper ID: 020131795

a) SWOT Matrix, which is an analysis tool to get some

analysis of alternative strategies by using company
strength and weakness to take opportunity advantage and
avoid the threat
b)Boston Consulting Group (BCG) Matrix, which is an
analysis tool used to helps companies that have multiple
divisions to determine company position on sales growth
rate that can be formulated an alternative strategy that can
be held by company
c) Strategic Position and Action Evaluation (SPACE) Matrix,
which is an analysis tool that uses using the company's
financial strength (FS), the company's competitive
advantage (CA), environmental stability (ES) and industry
strength (IS) to determine which alternative strategies can
be chosen company
d)Internal External (IE) Matrix, an analysis tool that used to
help companies that have multidivision with power
measurement based on EFE and IFE total value were
obtained from each division
e) Grand Strategy Matrix, which is an analysis tool to
formulating corporate strategy based on market growth
with the current company competitive position
f) Decision Stage, stages using the input stage to objectively
evaluate alternative strategies matching stage result that
can be company implemented. The technique in this stage
namely Quantitative Strategic Planning Matrix (QSPM),
which is an analysis tool that compares several alternative
strategies are obtained in matching stage so as to obtain
priority list of the various alternatives.
As for some alternative strategies that can be applied to a
company as a decision result in the strategy formulation by
Fred R. David (2009) can be grouped into four groups of
generic strategies, namely:
1. Integration strategy, this strategy requires that companies
conduct more oversight of distributor, supplier and
competitor through merger, acquisition, or create their
own company. This strategy shaped forward integration,
backward integration and horizontal integration (vertical
integration strategy).
2. Intensive strategy, require intensive efforts to improve
the company's competitive position through existing
product. This strategy can be done in the form of market
penetration,
market
development
and
product
development.
3. Diversification strategy, intended to add new product.
This strategy in the form of related diversification,
unrelated diversification, and horizontal diversification.
4. Defensive strategy, done to save the company that in
spite of a greater loss or in other words to avoid the
company bankruptcy. This strategy in the form of
downsizing, divestiture, and liquidation.

3. Method
The object in this research is PT. Indofood Sukses Makmur,
Tbk. The method in this research is descriptive method to
comprehensively examine the strategic management
implementation at PT Indofood Sukses Makmur, Tbk in
2012. Data collected through literature study with further
examine the books, journals, and articles on strategic
management. This study uses secondary data analysis

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International Journal of Science and Research (IJSR)

ISSN (Online): 2319-7064
Impact Factor (2012): 3.358

obtained from PT. Indofood Sukses Makmur,Tbk annual

report in 2012 and information relevant to research on the
company website. Variable used in the research analysis tool
of Fred. R. David concept namely external variables
(opportunity and threat) and internal variables (strength and
weakness). Analytical tool in this study using analytical
framework of strategic management by Fred R. David model
(three stage) which are IFE & EFE matrix, SWOT matrix,
BCG matrix, SPACE matrix, IE matrix, Grand Strategy
matrix, and QSPM analysis.

4. Result and Data Analysis

4.1 Input Stage
In the first stage identifies external variables (opportunity
and threat indicator) and internal variables (strength and
weakness indicator) owned by company as part of the critical
success factors. The next steps determine the weight and
rating of critical success factor. After that is done the
multiplication between weight and rank values to obtain a
total score. Score of external variables and internal variables
can be calculated from the sum of all company scores.
External Factor Evaluation (EFE) Matrix
No

Critical Success Factors

Opportunities
1 Sound investment climate
Deregulation
of
government
2
restrictions on wheat flour import
3 Increase income per capita
Increase
society
aggregate
4
consumption
5 High public response to the product
6 Instant paced lifestyle
7 Overseas expansion
Threats
Fluctuation risk commodity price of
1
raw materials
Reputational risk issues related to
2
food safety
3 Increase in Minimum Wage
4 Competitors quantity
5 Sabotage experts
Negative effect of hazardous
6
substances HSE using
Strategic issues of environmental
7
pollution
Total

Weight Rating
4

Total
Score

Based on the IFE Matrix obtained a total score = 3.26 which

indicates that PT. Indofood has had a good strategy in
anticipation of internal weaknesses by maximizing existing
internal strength.
4.2 Matching Stage

0,07
0,10

0,28
0,40

0,07
0,07

0,28
0,21

4
3
3

0,10
0,07
0,07

0,40
0,21
0,21

0,09

0,27

0,05

0,10

3
3
3
2

0,06
0,07
0,08
0,05

0,18
0,21
0,24
0,10

0,05

0,10

1. Vertical Integration
a. Backward Integration (acquire supplier)
b. Forward Integration (adding distribution channels and
retailers)
2. Horizontal Integration
a. Aquicition (acquired companies both horizontally)
b. Joint Venture
3. Product Development (innovation products and add new
variant)
4. Diversification
a. Concentrated Diversification (establishing a new
company and add new business lines similar)
b. Conglomerate Diversification (adding new business
lines which are not similar)

1,00

3,19

4.3 Decision Stage

4
4
3

Based on the EFE Matrix obtained a total score = 3.19 which

indicates that PT. Indofood has had a good strategy to
anticipate external threats external to maximize the
opportunities that exist.

Paper ID: 020131795

Internal Factor Evaluation (IFE) Matrix

No
Critical Success Factors
Weight Rating Total Score
Strength
1 Good financial performance
3
0,07
0,21
2 Company value increasing
4
0,07
0,28
3 Wide market share
4
0,08
0,32
4 Good brand equity
4
0,10
0,40
Extensive distribution network and 4
0,07
0,28
5
quickly
6 Integrated supply chain and superior 4
0,09
0,36
7 Research and Development
3
0,07
0,21
Weaknesses
1 Require large capital
0,08 0,24
0,08
2 High operational cost
0,07 0,21
0,07
3 High leverage ratio
0,06 0,18
0,06
4 Lack of internal control
0,05 0,10
0,05
5 Too many brands
0,05 0,10
0,05
Products are easily imitated (mass 0,09 0,27
0,09
6
product)
Certain products contain ingredients 0,05 0,10
0,05
7
that are harmful to HSE
Total
1,00
3,26

Based on internal and external factors combination, there are

some strategic steps that can be applied PT. Indofood in
supporting business growth and development as follow:

The last stage is decision making by using matrix QSPM as

decision making tools. QSPM is a technique that objectively
determines alternative strategies. QSPM matrix will
determine which alternative strategies that will be used PT.
Indofood Sukses Makmur, namely by multiplying weight
from each key factors to value attractiveness (attractiveness
score) strategy called TAS (Total Attractiveness Score).
Multiplication results are then summed. TAS result is the
largest alternative strategy chosen by company. Based on the
calculation result can be seen that PT. Indofood prefer a
strategy 2 that is Horizontal Integration Strategy. In this
strategy PT. Indofood expands its business activities and
increases its product range by expansion (acquisition and

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International Journal of Science and Research (IJSR)

ISSN (Online): 2319-7064
Impact Factor (2012): 3.358

joint ventures) and diversification (concentration and

conglomeration).

5. Conclussion
After calculation and analysis on the matrix determination of
alternative strategies by Fred R. David concept, it can be
concluded based on research purpose that has been
formulated, as follows:
a. Analysis of five matrices are SWOT Matrix, BCG Matrix,
Space Matrix, IE Matrix and Grand Matrix, provide
consistent result that companies are a stage to be able to
grow and continue to expand its business, both
horizontally and vertically. Based on the BCG Matrix
result known that PT. Indofood position is in quadrant
"Stars", from the SPACE matrix indicator calculation
obtained coordinates X=3,4 and Y=2,8 known PT.
Indofood located on the upper right quadrant
Aggressive. From analysis known that IFES total value
of 3.26 and EFAS total value of 3.19 known strategic
position PT. Indofood located in Quadrant I (Grow and
Build) and from Grand Strategy Matrix mapping result
known that PT. Indofood strategic position located in
Quadrant I (Grow and Build).
b. The best alternative strategies that can be applied to the
company based on QSPM matrix calculation that is
Horizontal Integration Strategy with 5.94. Horizontal
integration strategy that can be chosen are expansion and
diversification. Analysis result show consistency with
steps taken by PT. Indofood to expand its business. PT.
Indofood expand by companies acquisition in single line
or new line and also joint venture with companies that
supply inputs for the company's core business. PT.
Indofood diversification step concentrate on the business
that has been established to continue innovate and
conglomerate with setting up a new business which is very
different from the company's business at the moment.
c. Recommended business strategy from QSPM matrix
analysis, namely Horizontal Integration Strategy.
Throughout the year 2012, PT. Indofood many
acquisitions as a way of business development, including
acquiring China Minzhong Food Corporation Limited
("CMFC"), acquired shares Filifina Roxas Holdings Inc.,
acquired PT. Pepsi-cola Indobeverages and a joint-venture
with Tsukishima Sukses Makmur Indonesia. Based on
three stage of strategic management Fred. R. David
concept can be seen that strategy alternative
recommendation relevant to business implementation that
has been done by PT. Indofood during period of 2012.

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